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Products Liability & Equipment Disposal


 

 

 

 

 

 

Product liability insurance protects a company against claims or suits arising from products a company has manufactured or sold. It covers a manufacturer’s or seller’s liability for bodily injury or property damage sustained by a third party due to a defect or malfunction of the product.

 

Product liability claims are typically based on one of the following:

 

·         Manufacturing or Production Flaw: the claimant alleges that some phase of the production process created a defect in the final product so that the product was unreasonably hazardous. For example; John purchases a table saw from a hardware store. John is injured when the blade guard flies off the saw. He sues the manufacturer, claiming the guard was improperly installed when the saw was manufactured.

·         Design Defect: the claimant contends that the product’s design is inherently unsafe. For example; John (in the previous example) sues the manufacturer on the basis that the saw was improperly designed. He contends that when the manufacturer designed the saw, it failed to ensure the guard would remain firmly in place.

·         Defecting Warnings or Instructions: the claimant alleges that the seller failed to provide adequate instructions on the proper use of the product, or that it failed to warn buyers of the product’s risks. For example; Bob buys paint thinner at a home store. Bill becomes ill while using the product in a windowless room. He later sues the manufacturer for failing to warn him that paint thinner should not be used in an enclosed environment.

 

While most product liability suits are filed against manufacturers, some are filed against product sellers. Product sellers include retailers, wholesalers, distributors, and resellers. A seller may be held liable for an injury to a product buyer if the seller helped market the product to the consumer.

 

These same risks are associated when looking to dispose of obsolete inventory or equipment, whether by sale or donation. If there is any probability that your equipment or inventory will be used again, here are some things to keep in mind:

 

·         How hazardous is the equipment?

·         What was wrong with the equipment for it to become expendable?

·         Was it too old to operate, did not operate properly, or were replacement parts unavailable?

·         If the original manufacturer or seller has gone out of business, the seller of used equipment may have full liability.

 

Some measures to consider to help mitigate this product liability exposure include:

 

·         Obtain advice of qualified legal counsel to be sure all mitigation measures are appropriate.

·         Make it clearly understood, in writing (such as in a sales agreement), that the equipment is being sold “as is”

·         Specify what “as is” might mean, i.e., with no inspections, testing, reconditioning, or repair performed.

·         Recommend that the buyer or recipient have it inspected and tested before it is used and repaired or upgraded as needed to be sure it is safe for use.

·         If there are any known safety hazards or deficiencies, identify them, and either repair them or recommend that the buyer/recipient repair them. It might be best to just scrap the equipment and not sell it or give it away.

·         Include an indemnity clause specifying that the buyer or recipient holds the seller (or company who donates the equipment) harmless for all liability, legal fees, and expenses, etc., arising out of the use of such equipment.

 

It is impossible to eliminate all hazards in connection with many products, no matter what you do. The thing to remember is that if there is a lawsuit, your best defense is to prove you took all reasonable measures to assure no one would be injured.

 

 

 

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About Us

BCH has a unique approach to advising our clients on how to control their Total Cost of Risk, not simply insurance cost. The Total Cost of Risk (TCOR) includes preventive, direct and indirect costs associated with operating a business. The BCH approach includes collaborating with our clients to create a long range written plan for controlling their TCOR .